Price Action is a forex trading method that focuses on the statistical probability of a currency pair to trade higher or lower in the short term.
Price Action, also called “No-Analysis Analysis”, does not rely on any technical analysis or fundamental data to make predictions; instead, it uses what has already happened and what is happening at that very moment. It can be used alongside various types of analysis for confirmation.
How to use price action in your trading strategy?
Price action has been rigorously tested by academics and was shown to have above-random predictive power for financial markets worldwide. Follow these steps to use price action in Pakistan.
Study the data
The first step of using price action is simple: Look at a daily chart. We want our data from yesterday to see how today’s actions compare to those from yesterday. The best way to do this is through drawing trendlines. They are easy to find; if prices were higher yesterday than today, draw an upward sloping line; if prices are lower today, draw a downward sloping line. It’s important to remember that these lines show the market’s overall movement, not whether prices went up or down this particular day.
Look at the trendlines
After you’ve drawn your trendlines, look at how far away they are from each other. If the closing price is at the top of an upward sloping trendline, then if it falls below that trendline by 1% or more, it creates a 1% sell signal. However, if the close is above the bottom of a downward trendline, there should be a buy signal if it rises 1% or more above that line.
Watch out for false signals
A prediction that fails means one of three things. Either the prediction was at the wrong time, it had a low probability of success, or it didn’t work. This last possibility is very bad because if you make enough predictions at enough different times, you are guaranteed to get some of them right! Because of this, any prediction that fails should be disregarded entirely.
Go long or short
Once you have your buy and sell signals, all you need to do is go long when there is a buy signal and go short when there’s a one for sell.
Use price action with other methods
You can use Price Action with other methods and analysis to help confirm your trades. If you were using a pivot point strategy, for example, and following the Price action signals as well, after getting an entry and stop loss in place, you could then wait for the price to hit the pivot point or break it before confirming it as a good trade.
Discipline and patience
The key to Price Action is discipline and patience. It doesn’t require a lot of work or learning different skills. All you have to do is sit down and wait for your trades to hit their full potential. If you’re not familiar with it already, this might not be the best place to start in forex trading due to how easy it can be used alongside other strategies and because it requires patience and discretion. However, Price Action traders typically boast higher profitability rates than other methods due in part to their high levels of discipline.
Summary
This method is one of many forex trading strategies that has existed for years now; however, because it doesn’t rely on any technical indicators or data (which are subject to change), it is sometimes referred to as “The Holy Grail” of Forex Trading. This is why traders find Price Action so intriguing. With no variables changing or moving around constantly, all that changes is the price, so this method begins to prove its validity. New investors looking for forex brokers in pakistan should look no further than Saxo Bank and sign up for their demo account before trading real money.
